Florida files two lawsuits against five debt settlement-related companies
Bill McCollum (R)
TAMPA, Fla. (Legal Newsline) - Two lawsuits have been filed by Florida's attorney general against five debt settlement-related companies alleging excessive feeds and conduct that defrauded consumers and damaged their credit.
The lawsuits allege that consumers were told that they could pay off their debts for only a fraction of what was owed. The companies then collected large up-front fees and left the consumers with little or no money to pay their creditors.
"These victims were hit with a one-two punch: they paid substantial up-front fees for services not provided as promised, then ended up with increased debt, ruined credit, lawsuits, bankruptcy and more," Attorney General Bill McCollum said.
The first lawsuit, filed against CSA-Credit Solutions, which claims to be a debt settlement industry leader, alleges the company unlawfully charged significant advance fees before it completed or even began its debt settlement services.
CSA offered to settle debt for consumers at approximately 50 percent of their fair balance within one to three years. The lawsuit alleges the company falsely represented the success rate of its debt settlement program.
CSA's credit plan instructed consumers to stop paying their creditors and to start a savings account to accumulate enough money to allow CSA to negotiate a lump sum payoff of the debt.
CSA, however, withdrew 85 percent of the saved funds during the first three months of the program for its own fees, leaving consumers without the money to negotiate a settlement. The consumers also suffer increased penalties for nonpayment to creditors during the time of non-payment.
The second lawsuit was filed against ADA of Tampa Bay, Inc., based in Clearwater, Fla., doing business as American Debt Arbitration. ADA of Tampa Bay's prinicpal Glenn P. Stewart is also named in the lawsuit as well as the Arizona-based Nationwide Asset Services, Inc., Service Star, LLC, and Universal Debt Reduction, LLC.
The defendants in the lawsuit are alleges to have promised to help pay of consumers' debts at significant savings without disclosing to the consumers the true cost of the defendants' services.
Consumers were allegedly also not informed that, in violation of Florida law, the companies were collecting at least the first three months' of payments as fees before any services began or funds could be accumulated for a settlement.
Consumers were also counseled during the savings period to cease payments and communications with their creditors, leaving the consumers open to great financial harm including increased penalties and lawsuits.
Both lawsuits ask the court for full restitution for the victims, injunctive relief and civil penalties for each violation of Florida's Deceptive and Unfair Trade Practices Act.